Origins, Organization and Prevention of
Terrorist Finance
Testimony
Jonathan M. Winer
Alston & Bird LLP
Former U.S. Deputy Assistant Secretary of State
International Law Enforcement
U.S. Senate Committee on Governmental Affairs
July 31, 2003
Mr. Chairman and Distinguished Members of the Committee:
I am honored to testify here today to share my views
on terrorist finance, developed during my service as
Deputy Assistant U.S. Secretary of State from 1994
through 1999, and most recently, in connection with
my service on as a member of the Independent Task Force
of the Council on Foreign Relations on Terrorist Finance
chaired by Maurice R. Greenberg and directed by William
F. Wechsler and Lee S. Wolosky. My testimony has been
heavily informed by and is consistent with the report
issued by that Task Force in the fall of 2002, whose
recommendations I endorse. The views as expressed are
my own, but the recommendations I make here parallel
in large part those of the Task Force as regrettably
few of the recommendations made almost a year ago have
yet to become reality.
On the U.S. side, it is essential that the Administration
declassify much of the information it may have regarding
Saudi terrorist finance, starting with the matters
pertaining to the September 11 attacks. With almost
two years having passed since the attacks, it can do
so without imperiling investigations: the terrorist
financiers covered their tracks long ago. I spent years
reviewing highly sensitive intelligence information
pertaining to illicit finance. I do not find credible
the assertions that have been made that declassifying
information provided to Congress by the Administration
more than a year ago would jeopardize U.S. national
security. Sunlight is the best disinfectant. The people
have a right to know about the trail of money that
made it possible for the September 11 terrorists to
murder our people. The material should be declassified.
As a second recommendation, let me emphasis how important
it is that the government of Saudi Arabia make public
what it knows regarding terrorist finance activities
of some key Saudi Arabian businessmen as well as make
public what it has done to seize the assets of and
punish its terrorist financiers. It is deeply ironic
that Saudi Arabia has demanded that the U.S. declassify
and release portions of the September 11 report that
reportedly discuss Saudi terrorist funding. The Saudi
government itself continues to maintain secrecy about
what it now knows about past financial support for
terrorism on the part of Saudi businessmen. It similarly
continues to maintain secrecy about its own actions,
if any, against the assets of such businessmen.
The relationship between the U.S and Saudi Arabia
has been sorely torn by September 11. If Saudi Arabia
is to repair that relationship, as well as restore
its image internationally, it needs to go beyond the
public actions it is now taking against terrorists
in Saudi Arabia, to take public actions against those
who funded Al Qaeda, permitting the allocation of millions
of dollars donated in the name of charity to Islamic
terrorists who used them in the cause of mass murder.
Summary
Until the terrorist attacks of September 11, 2001,
terrorist finance had remained a back-burner issue
internationally, despite efforts by the U.S. to require
countries to make it a serious crime and to prosecute
it as a serious crime. Combating terrorist finance
was especially minimalist in the Middle East, where
no jurisdiction had taken substantial steps to discourage
it, and few even had minimal anti-money laundering
or financial transparency laws in place.
Since the attacks, international organizations, responding
largely to US-led efforts, issued a series of measures
mandating that jurisdictions curtail the passage of
terrorist finance, including UN Security Council Resolution
1373, the FATF Eight Special Recommendations on Terrorist
Finance, and significant initiatives by the G-8 and
the European Union. Each of these resolutions made
clear in broad terms that nations must take more action
to inhibit the passage of terrorist finance through
domestic financial institutions. These international
efforts were supported by individual acts of legislation
passed by numerous jurisdictions, including global
financial centers such as the United Kingdom and United
States, and states in the Middle East and southwest
Asia previously known for minimal oversight of their
financial sectors. The resolutions were passed in an
effort to impede the passage of funds to terrorist
groups in the Americas, Asia, Middle East and Western
Europe.
During the first two years after the September 11
attacks, these initiatives have achieved modest successes.
Several dozen nations have seized terrorist assets,
together comprising more than $112 million, according
to the UN terrorist monitoring group. Many more countries,
including a number in the Middle East, have declared
that despite diligent search, there have been no terrorist
funds to be found. The U.S has shut down one substantial
international hawala network, Al Barakaat. However,
there is little evidence to date that new laws requiring
alternative remittance houses to register, enacted
in the U.S., Hong Kong and elsewhere, have yet had
the desired effect of forcing such institutions to
either submit to regulation and transparency or to
shut down. While a substantial number of countries
have enacted new laws and imposed new regulations to
avoid name and shame lists, institutions licensed in
poorly regulated jurisdictions still have substantially
unimpeded access to the financial institutions and
markets of New York, London, and Tokyo. Gold and diamond
markets, hedge funds, and free-trade zones continue
to abound, with few controls and open access to international
wire transfer capabilities. In practice, while terrorist
groups face new risks in laundering their money, they
continue to have a variety of mechanisms by which to
finance their activities, involving a range of both
banking and non-banking financial institutions. Further
progress in protecting against international terrorist
finance is unlikely without international action to
require customer identification and verification, know-your-customer,
and the ability to trace funds across jurisdictions.
Whether non-Islamic states with sophisticated financial
services sectors will require the financial institutions
they regulate to require such standards of their foreign
counterparts, especially in the Middle East and Asia
remains to be seen.
Much about the origin and history of recent terrorist
finance remains veiled not only by the terrorists but
also by ongoing investigative efforts and government
secrecy. But one core fact should by now no longer
be in dispute: Saudi Arabia has been the most significant
source of terrorist funds for Al Qaeda. Accordingly,
the response of Saudi Arabia to the terrorist finance
problem remains at the center of an effective global
response to terrorism. Although Saudi Arabia has now
undertaken a series of actions to combat terrorist
finance, it has yet to take a number of critically
important public actions that will be essential for
the further disruption of Al Qaeda's global operations.
Steps that have been taken include Saudi disruption
of operational cells and arrests or killings of more
than 25 suspected members of al Qaeda; announcements
that audits of Saudi based charities have been completed;
condemnations of extremism and arrests of radical clerics.
However, other major terrorist financiers continue
to live in Saudi Arabia not visibly affected by enforcement
activity.
For further progress against terrorist finance, both
the U.S. and Saudi Arabia need to take further actions.
Here at home, we need to centralize coordination and
oversight of terrorist finance. The President should
appoint a special assistant for terrorist finance,
as was proposed last fall by the Council on Foreign
Relations Task Force on Terrorist Financing. The U.S.
should press the EU, the G-8, and all countries in
the Middle East to criminalize all fundraising for
Hamas, everywhere. The U.S. Treasury should use the
Patriot Act Section 311 special designations to apply
sanctions to designated foreign financial institutions
that we know to have allowed themselves to be used
for funneling terrorist funds, tailoring the sanctions
to achieve the maximum impact on terrorist financing.
We should be sharing greater information with the U.S.
private sector regarding what we know and suspect about
terrorist money laundering and finance. We should be
intensifying our training efforts with other countries
on specific strategies to counter terrorist finance.
And when it comes to terrorist financiers, regardless
of their location or their nationality, we should be
prepared to name names and freeze assets, regardless
of such political considerations as whether the terrorist
financiers live in a large, oil producing Gulf State.
As for Saudi Arabia, it needs to arrest terrorist financiers,
freeze their assets, and announce these actions in
public. Without substantial and visible public actions
by Saudi Arabia against terrorist financiers, continued
stress in the U.S.-Saudi relationship is not merely
probable.
Funding Methods For Terrorism.
The methods employed by terrorist groups to garner
illicit profits are varied, and each group routinely
employs one or more mechanisms to raise funds, to place
and layer funds, and to invest funds for terrorism.
These include a mixture of ideological, religious,
criminal, and business sources, which often mingle
and merge, so that it becomes difficult to determine
the provenance of any particular terrorist funds in
any given case.
Terrorist funds for Al Qaeda have come not only from
misapplied Islamic charitable contributions but also
from investments in otherwise legitimate businesses,
such as Al Barakaat's financial services and Telecommunications
Empire. Traditional sources of funds for criminal organizations
are also tapped, especially extortion. There also been
a number of reports that businessmen paid Al-Qaeda
operatives extortion money to prevent attacks on their
business interests throughout the Middle East. The
alleged payments were made to assuage Bin Laden, who
reportedly threatened to initiate attacks against targets
in politically moderate Middle Eastern states, such
as Jordan and Saudi Arabia. Similarly, the tiny Abu
Sayyaf Group (ASG), which controls sections of the
southern Philippines and has close ties with a number
of Middle Eastern terrorist groups, routinely demands
monthly "revolutionary taxes" from local
residents, businessmen, and white-collar workers. It
also raises funds through kidnappings for ransom.
Terrorist groups are also linked to narcotics trafficking.
The LTTE, a highly organized terrorist group centered
in the northern and eastern coastal areas of Sri Lanka,
reportedly has close ties to drug trafficking networks
in Burma, and members of Hizballah are linked to drug
trafficking in Lebanon. The Al-Qaeda network received
millions of dollars per annum through the production
and distribution of opium, which was smuggled through
neighboring Central Asian states, or transported to
distribution networks in East Africa. Many terrorist
groups have also been linked to other criminal activities,
including smuggling and counterfeiting operations.
For instance, the Real IRA is active in smuggling assorted
goods into Great Britain. In recent years the Real
IRA established close links to British criminal groups
to sell converted diesel fuel on the black market.
Moreover the Real IRA established tobacco-smuggling
operational links to east European mafia, and oversees
counterfeit operations that produce pirated copies
of compact discs and videocassettes. When these illicit
profits are coupled with the millions of dollars raised
by Irish communities in the United States, the Real
IRA can easily afford to recruit new members, construct
bomb-making facilities, procure light weaponry, and
maintain close contact with other terrorist groups,
especially in the Americas.
Funds raised through criminal activities are supplemented
with private donations. Prior to Al Qaeda taking advantage
of charitable contributions, this approach was undertaken
by both Hamas and Hizbollah, which during the 1980
and 1990s received significant financial support from
Palestinian émigrés in Western Europe
and the US, and even greater support from wealthy Muslims
within the Middle East in their course of their making
of zakat, or charitable contributions. Since the onset
of the Second Intifada in mid-2000, Muslim clerics
and religious leaders from Lebanon, Sudan, Algeria,
and Jordan publicly and routinely solicit Muslims to
support suicide attacks against Israel by making donations
to Hamas activists. The backing of religious leaders
in the Middle East provides Hamas with spiritual support,
and assures a sympathetic presence in mosques, which
routinely collect funds for the movement. Efforts to
combat terrorist finance schemes were bolstered by
pledges from Kuwait, Bahrain and the United Arab Emirates
to improve the monitoring of charitable donations.
This may prove a difficult task. Intelligence agencies
anticipate that the increased presence of U.S. troops
in the Middle East may foster anti-US sentiment in
the region, and increase donations to charities linked
to Middle Eastern terrorist groups.
The growing sophistication and participation of Islamic
investors in western finance has also provided an increased
source of opportunity for terrorist finance. International
investigations continue among securities regulators
to determine whether international commodities and
futures markets, customarily a secure means of conducting
financial transactions with relative anonymity, were
used by buyers who knew about the 11 September attacks
in advance. In the days after the attacks on the U.S.,
financial regulators uncovered an unusual pattern of
purchases in shares of a number of companies that fell
40% after the attacks, and other suspicious investments.
Though no certain links have been made to members of
terrorist organizations, at least one purchaser of
the suspect investments reportedly left more than $2
million in profits uncollected after September 11,
rather than claim the funds and thereby risk identification.
The extent to which nation-states continue to sponsor
terrorist groups remains an open question. The Al-Qaeda
network received significant passive and active support
from more than one government in the region, and its
support from wealthy Saudi Arabians is by now difficult
to dispute based on documentation found on the hard
drives of computers used by Al Qaeda operatives. U.S.
officials continue to signal, with little public evidence
to date, that Iraq may have provided support for some
Al-Qaeda operations, including the attack on the USS
Cole in October 2000. There are also reports that Iran
has significantly increased funding to a number of
Middle Eastern terrorist groups. In an attempt to radicalize
the Palestinian peace process and establish an Islamic
Palestinian state similar to its own, Iran has allegedly
increased its financial support for Hamas through wire
transfers in Jordan. According to public reports, the
Iranian embassy in Damascus has been frequently used
as a meeting place for members of Hamas and Iranian
intelligence agents, suggesting ongoing cooperation
among Syria, Iran and Hamas.
Role of The Muslim Brotherhood.
The Muslim Brotherhood ("Brotherhood") has
played a central role in providing both the ideological
and technical capacities for supporting terrorist finance
on a global basis. Officially Jamiat al-Ikhwan al-Muslimun,
literally translated as the Society of Muslim Brothers,
the Muslim Brotherhood was founded as a religious and
political organization in Egypt in 1928 by an pan-Islamicist,
Hasan al-Banna. Early opposed to secular tendencies
in Islamic nations, the organization has sought to
foster a return to the original precepts of the Qur'an.
It grew rapidly, establishing an educational, economic,
military, and political infrastructure. Threatened
by its power, Egypt's government banned the organization
in 1948 and 1954. It has since existed largely as a
clandestine but militant group, marked by its rejection
of Western influences.
Elements of the Brotherhood reached Saudi Arabia and
the other Gulf states following the Egyptian disaspora.
Egyptian Salawfi Muslims involved in the Brotherhood
came into closer contact with Saudi Wahabism, and the
Brotherhood began to access to Saudi and other Gulf
state funds through the zakat process. As a result,
Islamic militants had access to revenue streams with
no controls that they used to support Islamic associations,
Islamic proselytizing, and in some cases, militant
and terrorist activity. This Gulf State support, in
which Kuwait has played a substantial secondary to
Saudi Arabia's primary role, has likely been the most
significant source of Al-Qaeda's funding.
As described by Kuwaiti liberal politician Abdallah
Bishara, "Charitable associations of Kuwait, Saudi
Arabia and other Gulf countries have invested huge
sums in Afghanistan and its neighboring countries to
create a structure of schools, Koranic seminaries,
Islamic cooperatives, humanitarian associations, and
social services networks that feed Islamic terrorism.
This Islamic system is the rear echelon that supports
Bin Laden. And this is why it becomes truly specious
to try to check with a magnifying lens whether this
money has indeed ended up in Bin Laden's pockets. What
really counts is knowing that the military training
camps in Afghanistan, Pakistan, Kashmir, and Chechnya
that are under Bin Laden's authority are nurtured by
that Islamic system which in its turn was created with
money from the Gulf. You will not find a single cent
in the possession of these organizations that did not
come from the Gulf region. . . . If it were wanted
to dry up the funding sources of terrorist organizations
at the world level it would not be difficult, because
they are all concentrated here in the Gulf region."
One example of the relationship of the Brotherhood
to the development of Al Qaeda funding networks, as
well as to the involvement of wealthy individuals from
Gulf States, is he allegation that Al Taqwa, one of
the Brotherhood's major financial mechanisms during
the 1990's, received funds from Kuwait and the United
Arab Emirates that were then transferred to its accounts
in Malta and Lugano and then to the Bahamas. Another
is the number of Islamic institutions based in Yemen
with alleged ties to the Muslim Brotherhood alleged
to act as incubators for terrorist training. These
included the al-Baihani school in Aden, owned by a
charity, now forcibly closed by Yemen's government,
the private al-Iman university, run by Sheikh Abd al-Majid
al-Zindani, a leader of the Islah party's radical wing,
also temporarily closed, and the Dar Al-Hadith institute,
located in a tribal region where Yemeni forces had
been searching for suspected Al-Qaeda members, was
closed. Last year, the government pushed through a
bill unifying the education curriculum and abolishing
the so-called scientific institutes - strict Islamic
schools with connections to Sudan's erstwhile spiritual
leader, Hassan al-Turabi, and, allegedly, Osama bin
Laden
The Brotherhood's role in the development of other
militant Islamic organizations is also illustrated
by its relationship to the establishment of the Indonesian
terrorist group Jemaah Islamiya, the JI, created with
the aim of setting up an Islamic state in Indonesia.
JI's founder has acknowledged being inspired by the
Brotherhood in the goal of jihad as a means to the
creation of an Islamic state in South East Asia covering
Malaysia, Indonesia, Singapore and the southern Philippines.
JI then received funding from wealthy Saudis affiliated
with Al Qaeda. In turn, the Brotherhood's central financial
mechanism, Al Taqwa, established operations in Malaysia
that linked to JI. According to the U.S. Treasury,
the al Taqwa group, which was designated as terrorist
financiers by Treasury on November 7, 2001, has long
acted as financial advisers to Al Qaeda, with offices
in Switzerland, Liechtenstein, Italy and the Caribbean,
providing direct assistance to Osama bin Laden as well
as investment advice and cash transfer mechanisms for
Al Qaeda and other radical Islamic groups.
Separately, the Brotherhood has been characterized
by the U.S. Treasury as the parent from which Hamas
ultimately emerged. It also has been linked to a wide
range of Islamic terrorist groups, including at various
times over the past two decades, the Tamil Tigers,
the Afghan mujahidin, the Kashmiri mujahidin, and wars
of Islamic revival from Algeria to Egypt, Sudan to
Saudi Arabia, Bosnia to Chechnya, Afghanistan to Kashmir,
and Central Asia to Mindanao in the Philippines.
In summary, the Brotherhood spread both the ideology
of militant pan-Islamicism and became the spine upon
which funding operations for militant pan-Islamicism
was built, taking funds largely generated from wealthy
Gulf State elites and distributing them for terrorist
education, recruitment, and operations widely dispersed
throughout the world, especially in areas where Muslims
hoped to displace non-Muslim or secular governments.
International Efforts to Counter Terrorist
Finance.
The United Nations Convention for the Suppression
of Financing of Terrorism was proposed eighteen months
before 11 September 2001, but had received little serious
attention. Forty-one states had signed the Convention,
but only six had ratified the convention before September
2001. After 11 September 2001, in an effort to assure
U.N. support for combating terrorist finance schemes,
the UN Security Council unanimously adopted Resolution
1373 (UNSCR 1373), a binding document that requires
all 189 U.N. member states to criminalize the use or
collection of funds intended, or known to be intended,
for terrorism; freeze immediately funds, assets or
economic resources of persons who commit, attempt to
commit, or facilitate terrorist acts and entities owned
or controlled by them; prohibit nationals or persons
within their territories from aiding or providing any
aid to the persons and entities involved in terrorism;
refrain from providing any form of support to entities
or persons involved in terrorism; and deny safe haven
to those who finance, plan, support, or commit terrorist
acts, or provide safe havens.
Member states were required to submit progress reports,
providing information as to how they have implemented
Resolution 1373 by the end of 2001. The incomplete,
and in some cases misleading responses provided a window
of the distance yet required to combat terrorist finance
by governments in some of the most vulnerable countries.
For instance, UAE described as anti-terrorist legislation
laws forbidding efforts to engage in armed overthrow
of the governments of the UAE. Responses by Yemen and
Oman were too vague to permit analysis of whether they
had undertaken any substantial anti-terrorist efforts.
During 2002, however, a number of countries, including
most of those in the Middle East other than Saudi Arabia,
enacted comprehensive anti-money laundering and terrorist
finance laws, which on paper at least fully implemented
Resolution 1373.
At the community level, the European Union (EU) undertook
several efforts against terrorist financing and money
laundering in the wake of September 11. On 4 December
2001 the European Community adopted an amendment to
Directive 91/308, its main anti-money laundering instrument,
to expand reporting obligations to include attorneys,
and require the oversight of funds channeled through
exchange bureaus .The EU also froze the assets of terrorist
groups, charities and individuals linked to terrorist
finance schemes, established a counter-terrorist unit
within Europol intended to work closely with US counterparts,
and pledged to ratify a convention on mutual assistance
in criminal matters during the course of 2002. The
EU undertook plans to introduce a union-wide arrest
warrant to replace the current extradition system between
the countries. Within the EU, however, legal measures
are generally not applicable until they have been undertaken
by individual EU member states, many of which have
been slow to take action curtailing illicit finance
schemes. In other cases, some EU states have taken
independent views of which groups activities are terrorist,
and which are not subject to sanction. For instance,
the EU has not frozen the assets of organizations affiliated
with HAMAS, only funds destined for Izz al-Din al-Qassam,
the military arm of Hamas. Investigators, however,
routinely link the funding of Hamas militant activities
to Hamas front organizations that claim to support
only social activities in the Middle East.
The FATF responded to the September 11 attacks by
explicitly adding terrorist finance to its existing
remit to combat money laundering after a two-day meeting
in Washington in late October 2001. It issued a series
of Eight Special Recommendations dealing specifically
with terrorist financing, which if systematically implemented
and enforced, would have a substantial impact. The
recommendations highlighted the level of work still
be undertaken, asking countries to ratify the 1999
UN Convention for the Suppression of the Financing
of Terrorism and UNSCR Resolution 1373; to criminalize
the financing of terrorism, terrorist acts and terrorist
organizations; freeze and confiscate terrorist assets;
report suspicious transactions linked to terrorism;
provide the greatest possible measure of assistance
to enforcement agencies in other jurisdictions that
investigate terrorist financing; impose anti-laundering
requirements, such as licensing, on alternative remittance
systems; strengthen customer identification measures
in all wire transfers; and to ensure that non-profit
organizations and charities are not misused to finance
terrorism.
FATF member states pledged to implement the Eight
Special Recommendations by June 2002, and develop a
process of self-assessment to aide other states in
implementing the new recommendations. This deadline,
however, was not met, because of a lack of cooperation
in the international financial community, especially
from the Gulf States, none of whom have yet to implement
the entire array of Eight Special Recommendations.
In theory, the FATF could "blacklist" non-cooperative
countries and call on its member states to implement
sanctions, such as detailed inspections of accounts
that contain funds from non-compliant jurisdictions
or a reduction in bilateral and international aid programs.
But to date, the FATF has not undertaken action to
name and shame for failures to abide by terrorist finance
recommendations.
After September 11, the International Monetary Fund
(IMF) and the World Bank each pledged to assist in
the campaign to cut terrorist funding. In November
2001, the IMF's International Monetary Financial Committee
(IMFC) called on all countries to establish financial
intelligence units and to increase information sharing
across jurisdictions. The IMFC also agreed to counter
terrorist financing by accelerating its program of
offshore financial center assessments, and to work
more closely with the FATF. The World Bank held a ministerial-level
meeting in November 2001, and pledged to aid in capacity-building
in states that are ill-equipped to regulate money laundering
or terrorist financing and are unlikely to meet the
new international standards. However, neither of these
organizations has chosen to make financial transparency,
including effective action against money laundering
and terrorist finance, a conditionality on further
lending activities.
At a closed meeting held in Monaco on 7 June 2002
members of the Egmont group, an informal organization
composed of experts in financial intelligence from
78 countries, met to discuss on-going efforts to combat
terrorist finance schemes. The frank discussions revealed
a growing frustration toward a number of Gulf States
for failing to track funds linked to al-Qaeda. Western
regulators expressed marked concern over the failure
by jurisdictions in the Middle East to provide assistance
to enforcement agencies in other jurisdictions, confiscate
terrorist assets, and impose licensing requirements
on alternative remittance systems, especially hawaladars
located throughout the region.
Efforts by Middle Eastern States to Curtail
Terrorist Finance.
The well-publicized transfer of funds from financial institutions
in the United Arab Emirates (UAE) to al-Qaeda cell members
in the United States has caused the UAE to reverse years of
inactivity, and pass legislation to combat financial crimes.
In early October 2001 the UAE put into force the Law Regarding
the Criminalization of Laundering of Property Derived from
Unlawful Activity, and drafted legislation to criminalize hawalas.
Individuals convicted of an irregular money transfer to finance
kidnapping, piracy and terrorism in the UAE could receive a
seven-year prison sentence and a $272,000 fine. Financial institutions
are now obliged to report suspicious transactions and the Central
Bank is authorized to freeze suspected assets up to seven days.
A financial information unit is to be formed within the Central
Bank, as well as a National Anti-Money Laundering Committee,
chaired by the Governor of the Central Bank. Significant problems
still plague financial institutions located in the UAE. There
have been no convictions related to financial crimes in the
emirates, and Western regulators remain skeptical over the
ability of UAE to oversee transactions through hawala brokers.
Notably, many bank tellers in the UAE are South Asian immigrant
workers, for whom questioning or challenging of the local documentation
of an UAE citizen could prove problematic.
UAE concrete action to assist in efforts to combat
terrorist finance schemes over the fall and early winter
of 2001 presaged other Middle Eastern states initiating
nascent steps to combat terrorist finance schemes.
In early 2002, Saudi officials invited the FATF into
the Kingdom and instructed the appropriate authorities
to assist in the preparation of regulations to curtail
financial crimes. The Saudi Arabian Monetary Authority
reportedly began monitoring 150 suspicious accounts
at the request of US law enforcement officials. Western
officials have expressed concerns, however, at pronouncements
from Saudi officials who have stated that accounts
held by Saudi nationals are only being monitored in
financial institutions located outside of the Kingdom.
Despite conflicting statements by U.S. officials, no
one has yet identified any bank accounts related to
terrorist finance schemes that have been frozen by
Saudi officials. Other states in the Gulf have followed
Saudi Arabia, mixing reform and denial. In late March
2002, for example, Oman issued an anti-money laundering
law as part of a pledge to combat the financing of
global terrorism. However, at the same time, authorities
in Oman continue to contend that domestic financial
institutions are not vulnerable to money-laundering,
despite the reality that Oman abuts the Pakistan/Afghanistan/Iran/Europe
drug smuggling route, and offers a sophisticated financial
infrastructure to assist in the transfer of illicit
assets out of the region.
Central Role of Saudi Arabia
In my judgment, based on the public information I have reviewed
since the September 11 attacks, Saudi Arabian funders have
constituted the preponderant sources of funds for the development
of Al Qaeda, and a major source of funds for many other terrorist
organizations, including Hamas. Notably, however, the public
evidence regarding Saudi support of terrorists is both murky
and voluminous. It is murky because only sparse evidence in
the form of documents and witnesses has been made public regarding
particular terrorist financiers by the U.S. or other governments
since the September 11 attacks. It is voluminous in that most
of the major elements of Al Qaeda have reported Saudi funding
ties, and Saudi funds permeate the world of Islamic charities,
supporting entities in the Middle East, South Asia, Southeast
Asia, Europe and North America tied to terrorism. On a regional
basis, such terrorist funding links include:
· In Pakistan, support for religious schools
by Saudi charities that have become training grounds
for Al Qaeda at a sufficiently dangerous level that
President Musharref has requested such support to cease.
· In Afghanistan, Albania, Bosnia, and Chechnya, direct support for Islamic
resistance by Saudi charities such as Khalid bin Mahfouz's and Yasin al Qadi's
Muwafaq or Blessed Relief and Benevolence International, as well as providing
direct support to Hamas for terrorist activities.
· In Europe, financial support for Mosques linked to Al Qaeda and/or the
Muslim Brotherhood, in such countries as Germany, Italy and the United Kingdom.
This has included funneling by Al Qaeda of funds from Saudi Arabia to front companies
in Madrid, Spain between 1995 and 2001. The companies were allegedly controlled
by Muhammad Galeb Kalaje Zouaydi, European chief financier for Al Qaeda, and
a Syrian (not Saudi) national. Allegedly, hundreds of thousands of dollars flowed
from Saudi Arabia into the accounts of these companies and to Al Qaeda and other
radical Islamicist groups.
· In the U.S., funding of numerous charities by Suleiman Abdul Al-Aziz
al-Rajhi, a senior member of one of Saudi Arabia's most prominent families. These
charities, largely based in Herndon, Virginia, are according to press reports
under current investigation by the FBI and have been in turn linked to Muslim
Brotherhood specially designated terrorist finance company Al-Taqwa.
· In the Philippines, funding by Khamil al-Shalifa, a brother-in-law of
Osama bin Laden, of Abu Sayyaf and possibly of Jamaah Ismaliya in Indonesia.
What's the Evidence for Terrorist Finance
Involving Saudi Arabians?
There are many data points regarding Saudi Arabia
and Saudi Arabian persons as sources of funds for Al
Qaeda and other terrorist groups, but little narrative
material laying out and integrating the data into a
cohesive account. Moreover, because of the scanty information
that has been made public, it remains very difficult
to determine the extent to which persons that have
been publicly identified as linked to terrorist finance
intentionally engaged in the activity, or provided
funds that were then abused by others, or taken beyond
authorized military purposes, such as funding Hamas
or rebels in Chechnya, or always intended for Al Qaeda's
general use.
Current public information about these strands
includes:
The Golden Chain. A handwritten list found by the
FBI in a raid of the Saudi charity Benevolence International
in Sarajevo in March 2002 purports to specify 20 wealthy
donors to Al Qaida, including "the bin Laden brothers" and "Baterji," an
apparent reference to Adel Abdul Jail Baterjee.
The Spanish/Saudi Connection. Mohamed Galeb Kalaje
Zouaydi, a Syrian-born businessman charged with financing
the September 11 terrorist attacks, allegedly channeled
670,000 Euros to Al Qaeda cells in the U.S., Germany,
Saudi Arabia, Belgium, China, Turkey, Jordan, Syria
and the Palestinian territory. According to Spanish
police, Zouaydi lived in Saudi Arabia from 1996-2000,
where he collected funds for purportedly charitable
purposes that he then used to fund Al Qaeda. These
operations were in turn linked to the purchase of weapons
from Kosovo Albanian guerrillas for bin Laden's operations
in Afghanistan and financial support for a Yemenese
who attempted to murder the Prime Minister of Yemen.
In the fall of 2002, U.S. and Spanish investigators
were quoted as expressing frustration with their inability
to obtain information from the government of Saudi
Arabia regarding the "hundreds of thousands of
dollars" that flowed from Saudi Arabia into the
accounts of the Spanish companies used as conduits
for money to Al Qaeda and other radical Islamic groups.
Allegations Regarding Major Saudi Bankers and Businessmen.
Press accounts have repeatedly identified a small number
of potentially significant sources of terrorist funds
from Saudi Arabia, although the limits to publicly
available information continues to make an informed
assessment possible of the involvement of any of these
individuals in the alleged activity. Reported names
include such persons as Yasin Al-Qadi (Muwafaq); Sheikh
Saleh Kamel, chair of the Dallah Al Baraka Group; Khalid
bin Mahfouz and possibly some of his relatives; the
Al-Rajhi Family, including Saleh Abdul Aziz Al Rajhi;
Wael Hamza Jelaidan (Rabita Trust); the Abdullatif
Jamil Group of companies; and Adel Abdul Jalil Batterjee.
Allegations Regarding Major Charities. Saudi funds
have supported Islamic charitable activities throughout
the world, for Islamic centers, mosques, schools, health
care facilities, food distribution, and housing. Some
half a dozen of the most visible charities, including
two of Saudi Arabia's largest, the International Islamic
Relief Organization ("IIRO") and the World
Muslim League, have repeatedly been linked to supporting
terrorist organizations in areas well beyond the Persian
Gulf. These include:
The IIRO. Established in 1978, the IIRO has branches
throughout the world. Its official activities, as specified
on its website, include building mosques, financing
and administering schools and sponsoring orphans. Its
alleged finance of terrorism include: (a) employment
of Mahmoud Jaballah at its offices in Canada, who was
arrested in 1999 (and again in 2001) for belonging
to Al Jihad; (b) financial support through its office
in Zamoanga City in the Philippines for secessionist
Islamic militants in the southern region of the country,
through Mohammad Jamal Khalifa, Osama bin Laden's brother-in-law;
(c) alleged direction of planned attacks on U.S. consulates
in Madras and Calcutta through the offices of IIRO
Asia; (d) alleged support for the terrorists involved
in the 1998 embassy bombings in Dar Es Salaam, Tanzania
and Nairobi, Kenya, leading to it being closed by the
Kenyan government.
Muwafaq or Blessed Relief. Muwafaq has allegedly forwarded
millions of dollars to Al Qaeda for terrorist training
and resistance in Afghanistan, Bosnia, and Chechnya,
as well as to Hamas.
Benevolence International, an Islamic charity founded
in 1987 and alleged in a federal indictment in Chicago
to have supported Al Qaeda for more than a decade.
The charity spent a reported $3.4 million on relief
operations in 2000-2001 alone. The initial president
and secretary of the organization was Adel Batterjee,
a Saudi identified by federal investigators as the
person referred to in the "Golden Chain" memorandum
found at the raid by Benevolence International's headquarters
in Sarajevo specifying Al Qaeda's principal financial
benefactors. Benevolence International also has had
interlocking directors and senior officers from the
World Muslim League.
Al-Haramain Islamic Foundation. This charity is based
in Riyadh, with offices in more than 50 countries.
Of these offices, U.S. intelligence has found sufficient
evidence of terrorist finance activity, shared with
the Saudi government to secure the near-term closing
of their operations. As with the IIRO, its official
activities include building mosques, financing and
administering schools and sponsoring orphans. It has
been listed by the U.S. as a specially designated global
terrorist organization as a result of its alleged assistance
to the Egyptian terrorist group known as Gamma Al Islamia,
as well as contacts with the Taliban, Osama bin Laden
and Al Qaeda. In May 2003, Saudi Arabia asked the Al-Haramain
Islamic Foundation to suspend its activities outside
of Saudi Arabia until a security clearance mechanism
to screen all personnel is implemented. The charity
has closed offices in Croatia, Albania and Ethiopia,
and the Saudis state that closures are underway in
Kenya, Tanzania, Indonesia and Pakistan, although there
are other reports that some Al-Haramain offices have
closed and then reopened, including the one in Indonesia.
Rabita Trust. Based in Pakistan, with the mission
of repatriating and rehabilitating Pakistanis stranded
in Bangladesh and India after the partitions, the Rabita
Trust was founded by the secretary general of the Muslim
World League and funded by wealthy Saudis. It was listed
as a specially designated global terrorist organization
by the U.S. on October 12, 2001.
World Muslim League. One of the largest charities
created by the Saudi royal family, World Muslim League
personnel have reportedly worked for or with Al Qaeda
in Bosnia and Kenya.
Wafa Humanitarian Organization. This Saudi-funded
charity was based in Afghanistan and listed as a specially
designated global terrorist organization by the U.S.
on December 20, 2001. It allegedly was involved in
efforts to develop a nuclear program for Al Qaeda.
What Measures Has Saudi Arabia Taken to Combat
Terrorist Finance?
The May 2003 terrorist attacks in Saudi Arabia have
been described by Saudi Prince Bandar as "our
September 11," prompting recognition by the government
that further anti-terrorist steps are still required,
including greater attention to combating terrorist
finance. Since then, domestic anti-terrorist efforts
by the Saudis have substantially intensified, as have
efforts by terrorists to carry out attacks within the
Kingdom. As of mid-June 2003, Saudi Arabia reported
to the U.S. government that it had arrested some terrorist
financiers and is prepared to arrest more over the
summer of 2003. The Kingdom is also moving forward
with an anti-money laundering and terrorist finance
law that it intends to have in place by the time of
its first assessment by the Financial Action Task Force
("FATF"), currently scheduled to begin in
September 2003. However, public information on the
actual activities undertaken by Saudi Arabia to combat
terrorist finance remains obscured in several of the
most important areas. These include:
Arrests. There have been no publicly reported law
enforcement arrests involving terrorist finance. There
have been several cases in which Saudi Arabia reported
seized assets at the request of the U.S. In its report
to the UN, Saudi Arabia stated that it had no successful
prosecutions pertaining to terrorist finance acts on
the part of any Saudi person, inside or outside of
Saudi Arabia. According to the U.S. Department of State,
Saudi Arabia has had a small number of prosecutions
for money laundering that originated from the filing
of suspicious transaction reports. One Saudi official
has informally stated that an unspecified number of
terrorist financiers have been arrested as of June
16, 2003, although no public announcement of the arrests
had been made by that date. The same official also
stated that the assets of Yasin al-Qadi, a wealthy
Jeddah businessman listed on the specially designated
global terrorist list, had also been frozen, but this
has not been stated publicly or verified to date.
Asset Freezes. In October 2001, U.S. Treasury officials
reported that Saudi Arabia had agreed to block financial
assets for groups associated with Al Qaeda. Earlier,
there had been reports that Saudi Arabia had agreed
in September 2001 to freeze a small number of bank
accounts from the National Commercial Bank ("NCB")
and Faisal al Islamic Bank, but that subsequent cooperation
has been "inconsistent." On January 28, 2002,
Saudi Arabia announced that it had "acted" against
150 suspected terrorist accounts, but did not specify
what action had been taken. In February 2002, Saudi
Arabia announced that it had frozen four bank accounts
linked to suspected terrorists. According to the Associated
Press, the announcement was the first time Saudi Arabia
had acknowledged it had frozen any terrorist-related
accounts, and came the same day Interior Minister Prince
Nayef told the AP that no accounts had been frozen.
On February 16, 2002, an unnamed senior source at SAMA
stated that four accounts had indeed been frozen, and
that each belonged to foreigners in Saudi Arabia rather
than to Saudi citizens. According to the Saudi government,
as of December 2002, it had frozen 33 accounts belonging
to three individuals totaling $5,574,196. In a recent
press release, Saudi Arabia has stated that it was
also one of the first countries in the world to take
action against terrorist finance when it froze the
assets of Osama bin Laden in 1994.
Action Against Charities. In March 2002, the U.S.
and Saudi Arabia announced a joint crackdown on a Saudi
charity whose operations in Bosnia and Somalia have
been linked to Osama bin Laden, agreeing to freeze
the assets of two branches of Al-Haramain Islamic Foundation.
According to press accounts, Al-Haramain had been used
by the Saudi government as a conduit for relief aid
sent to Afghanistan as recently as January 2002 and
the group had close ties to senior Saudi officials.
U.S. Treasury officials were reported as alleging that
Al-Haramain employees in Somalia and Bosnia had been
connected to terrorists for years, funneling money
to a terrorist group by pretending the funds were going
to build orphanages, Islamic schools and mosques. In
the summer of 2002, Saudi Arabia also reportedly undertook
joint action with the U.S. to freeze the assets of
Wa-el Hamza Julaidan, a Saudi fugitive alleged to have
funneled money to Al Qaeda, and a director of the Rabita
Trust. On June 12, 2003, Adel Al-Jubeir, the foreign
affairs advisor to the Crown Prince, announced that
Saudi Arabia had "closed the door on terrorist
financing and money laundering," through promulgating
new regulations to prevent charities from giving money
outside Saudi Arabia except under strict controls and
oversight. According to a June 12, 2003 Saudi press
release, the new regulations require:
· Identification and consolidation of all bank
accounts of a charitable or welfare society into a
single account for each such organization.
· Requiring identification of each depositor.
· A prohibition on cash withdrawals from any
Saudi charity.
· On-site inspections of Saudi banks to determine
that the rules regarding charities are being implemented.
· Prohibiting Saudi foundations from maintaining
offices outside of Saudi Arabia.
In addition, in June 2003, Saudi Arabia was reportedly
preparing to close an additional eight branches of
Al-Haramain Islamic Foundation at the request of the
U.S., after the U.S. provided it with detailed intelligence
regarding the involvement of those branches in terrorist
finance.
Identification of Terrorist Fronts. Since September
11, Saudi Arabia has reportedly worked with the U.S.
to identify a network of more than 50 shell companies
that Osama bin Laden used to move money through more
than 25 countries around the world. The companies were
identified as located in the Middle East, Europe, Asia
and the Caribbean. According to Anthony Cordesman,
Saudi Arabia has "quietly" provided information
on suspect Saudi accounts in Switzerland, Liechtenstein,
Luxembourg, Denmark and Sweden.
Other Activity. On June 12, 2003, the Saudi government
announced that it had accelerated a national study
of its school curriculum, undertaken by its Ministry
of Education, in response to the May 12, 2003 terrorist
attacks within Saudi Arabia. It stated that it had
adopted two pilot programs in Jeddah and Riyadh, that
if successful would then be adopted nationally. It
further stated that it had organized a new joint U.S.-Saudi
counterterrorism team, including persons from both
its intelligence and law enforcement agencies, to work
side-by-side to share information on terrorism in "real
time" and to conduct joint operations.
Is Saudi Arabia Still Vulnerable to Terrorist
Finance?
Although Saudi Arabia has taken a number of actions
to create a legislative framework to combat terrorist
finance, it remains a potential source of funds for
terrorism due to a number of vulnerabilities that remain
difficult for its government to address. These include:
Charities. Islamic charities funded by Saudi Arabians
are estimated to receive about $3 billion to $4 billion
annually, of which some 10% to 20% is sent abroad.
Until recently, there was little to no regulation of
these charities by the Saudi government. Regulations
newly imposed in June 2003 to constrain new funding
to overseas charitable activities may reduce this vulnerability,
depending on the effectiveness of the oversight function
and the intentions of key bureaucrats within the country's
religious ministry. However, the Saudi government is
poorly situated to oversee effectively the disbursement
of funds that have already left the Kingdom prior to
the new regulations.
Use of Currency. Saudis frequently use cash for monetary
transactions rather than electronic payments through
credit cards or ATM machines. Reportedly the U.S. Treasury
in May 2002 expressed concern to Saudi authorities
regarding "the growing use of cash" in the
country, making tracing of terrorist funds more difficult.
Alternative Remittance Systems. Hawala transactions
outside banks and licensed moneychangers are illegal
in Saudi Arabia. Saudi Arabia has reported to the UN
that such services outside licensed banks are criminalized.
The State Department has reported that SAMA has investigated
a number of such cases in recent years. SAMA officials
have acknowledged that the financial system is porous
and includes illicit currency dealers and traditional
hawaladars that are difficult to police.
Support for Islamic Militancy. Saudi Arabia has provided
a political and religious environment in which Islamic
militancy has flourished. Saudi support for the Palestinians
in the Arab-Israeli conflict, urbanization, the Saudi
educational system, unemployment, and some themes within
Wahhabi religious teachings, including attacks on Christians
and Jews by some Islamic teachers, have contributed
to the politicization and radicalization of some Saudi
Muslims. The country's educational curriculum has long
included anti-Christian and Jewish hate literature,
as has material issued by the Saudi Ministry of Islamic
Practices. In recent weeks, Saudi Arabia has arrested
a small number of extremist Islamic clerics and announced
that it has sent thousands of others to school for
courses to discourage militancy and extremism. However,
the strands of religious extremism in Saudi Arabia
have been strong and militant pan-Islamic theology
remains a significant element fueling terrorism.
Ambivalence Towards Terrorism Associated With Islamic
Militancy. Saudi Arabia has long taken the position
that terrorist finance has not been a problem and has
not existed in Saudi Arabia. For example, the Saudi
July 2002 report to the UN stated "no financial
operations with terrorist aims have thus far come to
light in the country." It also appears to reserve
to itself a determination of what constitutes terrorist
finance, albeit in ambiguous terms. In its Resolution
1343 report, Saudi Arabia advised the UN that "in
the absence of a precise and unequivocal definition
of terrorism endorsed by the international community," it
can only freeze or seize funds on the basis of a request
from the Minister of the Interior to the Minister of
Finance, and confiscate funds only on the basis of
a judgment issued by a Saudi court. Given Saudi Arabia's
signature on most international treaties concerning
terrorism, the statement could be viewed as a veiled
articulation of a position that terrorism has yet to
be precisely defined internationally, and therefore
Saudi Arabia is free to decide who and who are not
terrorist financiers.
Bureaucratic Schizophrenia. Public expressions of
Saudi attitudes towards asset freezes have been inconsistent.
In October 2001, the governor of SAMA, Hamad Sayari,
stated that the country had frozen every account Saudi
Arabia could find on the U.S. Treasury terrorist list,
but it later appeared that Saudi Arabia took the position
that there were no such accounts. In February 2002,
Saudi Arabia announced freezing four terrorist-related
accounts in February 2002. Three months later, Sayari's
deputy at SAMA was reported as categorically denying
freezing any bank accounts, either of individuals or
corporate entities, relating to either money laundering
or terrorism. According to a BBC account, the official,
Muhammad Al-Jasir, stated that "not even a single
bank account has been frozen in Saudi Arabia," noting
at the same time that "this Jewish state has not
been complying with the 40 recommendations made by
the FATF," in an apparent suggestion that inadequate
regulation of money laundering in Israel was a greater
terrorist finance problem than any that might be posed
by Saudi Arabia.
Externally Held Funds. There is little the government
of Saudi Arabia can do regarding the billions of dollars
in Saudi-owned capital held outside of the country,
mostly in trusts and international business companies
where the ownership of the assets is hidden behind
nominees and agents. This vulnerability is one that
can only be dealt with through a global effort by international
organizations and other governments to strengthen implementation
of know-your-customer principles and to continue focused
intelligence acquisition targeting possible terrorist
financiers.
Legal Regime Regarding Money Laundering. As of June 2003, Saudi
Arabia has yet to create a comprehensive legal regime to combat
money laundering, leaving only drug money laundering as a predicate
offense.
Reporting. Although the Central Bank has issued guidelines
requiring know your customer and suspicious activity
reporting, the government's failure to publish statistics
makes it difficult to know how comprehensively this
regime has been adopted in practice.
Asset Freezes. The handful of accounts reported frozen
by Saudi Arabia to date can be interpreted as the result
of several likely factors: limited Saudi intelligence
on terrorist finance, a failure of political will,
a willful refusal to share information with the U.S.,
and/or a reluctance to provide the Saudi public with
information about enforcement actions taken within
the Kingdom.
Conflicts of Interest. The fox-guarding-the-chicken-coop
problem in Saudi Arabia is potentially substantial.
For example, a task force established by the Jeddah
Chamber of Commerce and Industry ("JCCI"),
to develop a comprehensive financial and administrative
system for charity in Saudi Arabia, was funded and
overseen by the Muslim World League ("MWL").
On the one hand, this is unremarkable, as the MWL is
Saudi Arabia's largest state-funded charity. On the
other hand, MWL has itself been repeatedly linked to
terrorist finance, through the activities of some of
its member organizations, including the Rabita Trust,
placed by the Treasury on its list of specially designated
terrorist organizations. Notably, the approach of MWL's
leadership to terrorism at an ideological level has
itself been ambivalent. For example, a group of scholars
affiliated with the MWL issued a statement January
11, 2002 describing terrorism to be only "any
unjustified attack by individuals, groups or states
against a human being." According to the MWL,
terrorism could include an attack on a person's "religion,
life, property and honor," but excluded jihad,
as "struggling against occupiers and colonial
settlers who drive people from their land and against
those who help them" is legitimate in Islam.
Corruption. Saudi Arabia has been slow to create a
system of civil law that would provide a secure, stable
foundation to permit people and businesses to secure
property rights and resolve commercial disputes. Despite
some progress against corruption, cronyism and local
agents remain norms in government contracting, and
foreign investment has remained minimal, making the
country both dependent upon, and resentful of, the
ruling family. Checks and balances are few, making
it difficult to police elements of the population,
either within the ruling class or elsewhere, who may
provide financial support for extremism.
What Further Steps Could Saudi Arabia Take
To Reduce the Threat?
Enact a FATF-Compliant Money Laundering Law. In the
current environment, Saudi Arabia's agreement with
the FATF to schedule an assessment in the fall of 2003
likely is evidence of the Kingdom's expectation that
it will have a FATF-compliant money laundering law
in place by that time. Its draft money laundering law,
which has yet to be made public, currently remains
under review by a Saudi religious council, one of the
final stages prior to adoption.
Intensify Crackdowns on Persons Linked to Terrorism.
Soon after the September 11 attacks, Saudi Interior
Minister Prince Nayef bin Abdul Aziz reportedly warned
that persons engaged in terrorist activities were "ill
and cannot be accepted in Saudi society, even if they
were part of us. Some organs of the body may become
ill, but the sick organ is amputated." Since then,
arrests of persons in Saudi Arabia linked to terrorism
have taken place in waves, often following the provision
of intelligence to the government of Saudi Arabia by
the U.S. These arrests appear to have substantially
accelerated since the May 2003 attacks. To date, such
enforcement activity has largely focused on terrorist
cells themselves. They must now focus on terrorist
financiers.
Stringently Oversee Charities. The Saudi government
appears determined to gain control over the uses of
funds overseas raised by charities within the Kingdom
as a matter of protecting its own national security.
It also appears willing to work with the U.S. on shutting
down particular foreign offices of Saudi charities
when there is evidence to enable the Saudi government
to make an adequate case for such closures with its
own clerics. However, follow-through has been inconsistent.
In case of Al Harmadain, for example, foreign offices
have closed and reopened. To date, it remains uncertain
whether oversight of charities within Saudi Arabia's
borders yet extends to the actual activities in the
field of Saudi-supported charities operating in the
field. Oversight of the financial activities of firms
operating in other countries can be difficult for governments
in any context. For Saudi Arabia to do so regarding
Islamic charities will require a sustained effort.
Moreover, such an effort is extremely unlikely to succeed
in the absence of the application of public sanctions
to charities found to have engaged in prohibited activities.
Make Actions Against Terrorist Finance Public. Adel
A. Al-Jubeir, the foreign affairs advisor to the Crown
Prince responsible for communicating Saudi efforts
regarding terrorist finance to the U.S. public, argues
that the Kingdom has sought privacy in the past regarding
problems such as terrorist finance, but now is moving
towards greater transparency and disclosure to its
own public given that public's desire to see the terrorists
who have undertaken bombings within the Kingdom punished.
Such public naming-and-shaming is essential. It remains,
unfortunately, invisible in the area of terrorist finance,
raising the question of whether enforcement activity
is actually taking place. Saudi Arabia needs to let
the world know when it has taken an action against
a specific designated terrorist, rather than to speak
in generalities only.
Continue to Assist the U.S. The U.S. government is
best in the position to monitor Saudi international
cooperation against terrorist finance by assessing
the Saudi response to particular requests for information
on the financial activities of suspected terrorist
financiers, and its willingness to freeze assets of
such persons or entities. One indicator of such cooperation
would be agreement to provide access to suspected terrorist
financiers and their agents and related documents to
U.S. government investigators. Another would be to
return to the U.S. any Saudis who have fled to Saudi
Arabia to avoid U.S. legal proceedings or questioning.
Arrest and Seize Assets of Prominent Al-Qaeda Financiers.
Saudi Arabia needs to take public action against the
Saudis involved in the Golden Chain where there is
evidence to show financial support for Al Qaeda after
the time of Osama bin Laden's expulsion from Saudi
Arabia in 1992. These actions need to include arrests
and asset seizures.
Extradite Terrorist Financiers. Beyond arrests and
asset seizures are trials and sanctions. To date, Saudi
Arabia has refused (at least in public) either to try
or to extradite persons involved in terrorist finance.
Public trials of persons engaged in such activity,
together with seizures of their assets, might act as
a deterrent to other would-be terrorist financiers.
Close Financial Institutions Involved in Terrorist
Finance. To date, Saudi Arabia has imposed sanctions
on no financial institution it has licensed for involvement
in handling the funds of terrorism. Suspension or revocation
of license for negligence in handling terrorist funds
would act as a significant deterrent and constitute
an important indicator of Saudi political will against
terrorist finance.
Prohibit All Forms of Terrorist Finance. The continued
support by Saudi Arabia for Hamas creates a terrorism
problem that goes well beyond the impact on the Arab-Israeli
conflict, given the ties between Hamas and other terrorist
groups. An important indicator would be statements
and actions by the Saudi government demonstrating a
commitment to combat all forms of terrorism and terrorist
finance.
Demonstrate Full Implementation of Anti-Money Laundering
and Terrorist Finance Laws. To date, the Saudi government
has issued little information to demonstrate that its
anti-money laundering and terrorist finance laws have
actually been implemented and enforced. Publication
of information on suspicious activity reporting, investigations,
arrests, indictments, prosecutions and convictions,
as well as regulatory sanctions, would be indicators
that such laws are being enforced in practice.
Close Gaps in Existing Anti-Money Laundering Laws
and Demonstrating Enforcement of Such Laws. Saudi Arabia
has been studying proposed amendments to its existing
anti-money laundering laws for more than year, but
has yet to enact them.
Provide Public Data On Suspicious Transaction Reports.
Existing SAMA guidelines require know your customer
procedures and the provision by financial institutions
of suspicious transaction reports to SAMA, but there
is no evidence these guidelines are being enforced.
Public information on suspicious transaction reporting
could be one useful indicator that SAMA's anti-money
laundering guidelines have been adopted in practice.
Provide Greater Transparency and Accountability Over
Charities. The government of Saudi Arabia has announced
its comprehensive regulation and supervision of its
charities. Given such supervision, publication of detailed
data regarding the sources and uses of such funds should
be feasible, and could help demonstrate that controls
and oversight are actually in place.
For further progress, Saudi Arabia must fully implement
the oversight mechanisms it has put into place in theory
and apply them to all levels of the population, including
prominent Saudis. The government needs to communicate
to the Saudi people that no support of Islamic militancy
will be tolerated, whether directed inside the Kingdom
or beyond, and whether connected to Al Qaeda, Hamas,
or other organizations. Such a communication requires
the arrest of the most prominent funders of Al Qaeda,
based on existing documentation, together with the
freezing and ultimately the confiscating of their assets.
Saudi Arabia's continued support for institutions
run or managed by Hamas remains an especially significant
and continuing terrorist finance problem. Saudi Arabia's
official position is that the funds go solely to the "political
wing" of Hamas, not terrorists, and are targeted
to such institutions as the UN's High Commissioner
for Refugees and the Red Crescent. As of yet, there
is no public evidence that effective auditing mechanisms
are in place to prevent such diversions in fact, despite
Saudi Arabia's public assertions that audits of all
of its charities have been completed within the Kingdom,
as such diversions could readily take place within
the Palestinian territories regardless of paper documentation
made available in Saudi Arabia to authorities there.
Conclusion
The actions taken to date by the U.S. against terrorist
finance have helped to result in real progress to impair
the ability of terrorists to raise, transfer, and use
money to carry out terrorist activities. Before September
11, few countries had laws to combat terrorist finance.
Today, most do. Before September 11, few countries
froze the assets of terrorists. Today, some have. Prior
to September 11, the United Nations contribution against
terrorist financing was marginal. Since, it has become
significant and likely to be enduring. With that said,
progress is not accelerating and in some areas, it
may be flagging. The recommendations made last year
by the Task Force on Terrorist Finance of the Council
on Foreign Relations remain sensible and feasible.
They merely require greater political will. Among the
most important actions we could now take would be to:
· Designate a special assistant to the president
for combating terrorist financing with the special
mandate to lead U.S. efforts on terrorist financing
issues. This work should not be done, as it is today,
on a part time basis, or without the direct authority
and centralized responsibility of the President and
the NSC.
· Intensify multinational operational and policy coordination on border
controls and identification of terrorist networks.
· Intensify efforts to develop comprehensive global regulation of alternative
remittance systems such as hawaladars.
· Expand U.S. bilateral technical assistance programs in problem countries
to assist in the creation of effective regulatory, enforcement and control regimes
for financial institutions and charitable organizations.
· Undertake strengthened oversight of U.S. charities that send funds overseas.
· Use "special measures" under the Bank Secrecy Act as provided
by the Patriot Act to cut off correspondent relations between foreign financial
institutions with weak anti-money laundering practices and U.S. banks.
· Publicize what we know about foreign terrorist financiers - regardless
of whether they happen to be prominent persons in Saudi Arabia or other allies
- and take appropriate regulatory and enforcement action against them.
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